Mentor’s Comment: UPSC mains have always focused on ‘Scope of Fundamental Rights’ (2017) and Influence of Foreign Policy (2015).

Today’s editorial discusses the recent budgetary developments concerning India’s Ministry of External Affairs (MEA) and their implications for the country’s foreign policy. This content can be used in your Mains Answer for presenting the challenges particularly regarding.

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Why in the News?

The budget for India’s Ministry of External Affairs (MEA) deserves closer scrutiny because last year, the MEA budget saw a rare 23% spike, up from the modest 4% annual increase between 2017 and 2023.

• The MEA’s allocation not only reflects the government’s foreign policy priorities but also its capacity to deliver on its global ambitions and commitments particularly in light of India’s vision for a ‘Viksit Bharat’ by 2047.

How does the Indian budget reflect the country’s foreign policy priorities and ambitions?

• Increased Allocation for the MEA: The significant 23% increase in the budget for the Ministry of External Affairs (MEA) signals a commitment to enhancing India’s diplomatic capabilities and reflects the government’s recognition of the importance of foreign policy.
• Focus on Neighbourhood Policy: With approximately 50% of India’s foreign aid directed towards neighboring countries, particularly Bhutan, the budget emphasizes the “Neighbourhood First” policy, highlighting regional cooperation and stability as key priorities.
• Shift to Lines of Credit: The transition from outright grants to lines of credit (LoCs) indicates a strategic approach to financing sustainable infrastructure projects in recipient countries, enhancing India’s influence while ensuring accountability in project implementation.
• Investment in Diplomatic Infrastructure: A substantial portion of the MEA’s budget is allocated to embassies and missions, reflecting India’s intent to strengthen its global presence and engage more effectively in international diplomacy.

What role does it play in shaping India’s economic and geopolitical landscape?

• Attracting Foreign Investment: The budget prioritizes foreign investment by reducing corporate tax rates for foreign firms and easing regulations on foreign direct investment.
  • This aims to position India as a favorable destination for international capital, enhancing its economic growth prospects and global competitiveness.
• Strengthening Manufacturing and Infrastructure: By supporting initiatives like ‘Make in India’ and allocating substantial funds for infrastructure development, the budget aims to boost domestic manufacturing capabilities.
  • This not only fosters economic growth but also enhances India’s geopolitical standing by enabling it to become a manufacturing hub, particularly as companies seek to diversify away from China.
• Enhancing Regional Influence: The budget reflects a commitment to regional partnerships by directing a significant portion of foreign aid toward neighboring countries.
  • This strategy strengthens India’s influence in South Asia and promotes stability, aligning with its broader foreign policy objectives.
• Fiscal Discipline and Economic Stability: The budget emphasizes fiscal responsibility, targeting a reduction in the fiscal deficit to 4.9% of GDP.
  • Maintaining fiscal discipline is critical for sustaining investor confidence and ensuring long-term economic stability, which is essential for India’s ambitions on the global stage.

What challenges does India face?

• Geopolitical Tensions with China: India continues to navigate complex relations with China, particularly concerning border disputes and military tensions along the Line of Actual Control. The need for strategic dialogue and trust-building measures remains critical.
• Strained Relations with Neighbors: Political changes in neighboring countries, such as Bangladesh and Myanmar, and ongoing tensions with Pakistan complicate India’s regional diplomacy. The challenge lies in managing these relationships while promoting stability and cooperation.
• Impact of U.S.-China Rivalry: The evolving dynamics of U.S.-China relations, especially with the return of Donald Trump to the U.S. presidency, present both opportunities and challenges for India. Balancing ties with both powers while maintaining strategic autonomy is essential.
• Domestic Political Factors: Internal political developments, including public sentiment and government policies, can influence India’s foreign policy decisions. Ensuring that foreign policy aligns with domestic priorities is crucial for maintaining credibility and effectiveness on the global stage.

Foreign aid and shifts

• India’s foreign aid to other countries decreased by 10% for the fiscal year 2024-25, while loans to foreign governments increased by 29%.
• About 50% of India’s grants are directed towards neighboring countries, with Bhutan remaining the largest recipient due to historical ties and energy projects.
• There is a notable shift from outright grants to lines of credit (LoCs), with Bangladesh receiving the largest share at $7.86 billion. While LoCs support sustainable infrastructure, they require effective oversight.
• The Ministry of External Affairs (MEA) requires more resources to enhance its institutional capacity, including strengthening the Indian Foreign Service (IFS) and research capabilities.
• The MEA’s training budget increased by 30% for 2024-25, but overall capacity-building funds remain inadequate, and the IFS continues to be understaffed.
• The MEA’s budget for foreign missions and cultural diplomacy grew only by 7%, while significant academic institutions faced budget cuts of 20% to 22%.
• Despite investments in international dialogues to enhance India’s global image, there is a pressing need for more budgetary resources to support policy-relevant research at Indian universities and think tanks.

Way Forward: India will host the Quad Leaders’ Summit in 2025, marking an important opportunity to showcase India’s leadership and commitment to regional cooperation among the Quad nations—Australia, Japan, and the United States.

• India can reinforce its relationships with Quad partners, focusing on shared goals such as promoting a free, open, and inclusive Indo-Pacific.
• This aligns with India’s broader foreign policy objectives of enhancing regional stability and security.

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